CGT

sw_phil

A question related to CGT which is going to be needed sooner than I like because I have incurable cancer. We have two properties and are looking to downsize. 

We currently have a "Declaration of Trust" set up that puts the vast majority (99%) of a flat that I used to live in for work during the week with my wife.
I hold 1% of this and we receive a small amount of income from our son who pays rent to us for it.

If the Trust works for selling the property, would this mean we should buy our next main house in just my name and when I pass away, this goes to my wife without the CGT liability as we are married? Once we move, we intend to sell the flat and then based on my guess above, we would have no CGT for my wife and only 1% for myself. I am sure it is more complicated than this!

Thanks

Jeremy535897

I take it that your two properties are the flat and your current marital home? Are you looking to sell both, and buy a new marital home?

Assuming that you are, the marital home should be exempt from capital gains tax when sold, so long as it has always been your main residence.

As to the flat, was it ever treated as your main residence? If it was, there may be some reduction in the capital gain. As your wife owns 99% of the beneficial interest in the property, she will be taxed on 99% of the capital gain, based on its original cost. Without any figures, it is impossible to know what gain is involved. The income from your son is assessed equally on you and your wife unless you filed a Form 17 to reflect the true split between you, but this is not relevant for capital gains.

If you buy the new marital home solely in your name, then if it has increased in value by the time of your death, that increase in value will be tax free, but as a main residence it will be exempt anyway, so this would only be relevant if it ceased to be a main residence at some point in the future.

sw_phil

Hi, yes we are just moving house (downsizing) but I was wondering if we did anything with who this new property was owned by, whether or not it changes CGT liability on our flat when we come to sell that in the next few years? 

My accountant says not - she says the liability comes when you sell a property that is not your main residence and as the flat isn't then the move we have ahead of us doesn't come into it. I'm fine with that, we will still make some money from the flat and ATM my son is living there so it is helpful for him. 

Jeremy535897

Your accountant is correct. However, there is the point about the uplift to market value regarding your new residence that I made in the previous post.